Slowing traffic drives chains to rev up cost-efficient delivery efforts

Slowing traffic drives chains to rev up cost-efficient delivery efforts

With gas prices averaging more than $4 nationally and consumers less willing to get in their cars to eat out, more restaurant chains are emphasizing delivery service even if that means incurring added costs.

But some operators who don’t want to take on high gasoline bills, even if that would help maintain market share, are experimenting with more fuel-efficient methods for bringing meals to customers’ doors.

In Los Angeles, for example, an El Pollo Loco [3] branch has debuted a trio of snazzy, all-electric cars that do double duty as mobile “green billboards” to market the pilot program. More important, however, the battery-powered vehicles, if driven 30 miles per day, would save an estimated 700 gallons of gas per year.

Chains that already had featured delivery, such as Seattle-based Organic To Go [4] and Pizza Fusion [5] of Fort Lauderdale, Fla., have invested in hybrids and other super-fuel-efficient vehicles to reduce delivery costs and uphold the brands’ eco-friendly philosophies.

Pizza Fusion even requires its franchisees to buy at least two hybrid or equivalent vehicles to support the chain’s Earth-friendly orientations. For its part, Organic To Go is making the most of its service by tallying an average transaction exceeding $200 for every delivery sale.

Meanwhile, in a bid to win back diners who’ve decreased their driving, The Cheesecake Factory [6] is testing third-party delivery services that use conventional vehicles. Though the delivery companies say business is booming, higher gas prices have forced some to tweak policies to ensure their contracted drivers can cover their costs. That’s of particular concern in Cheesecake Factory’s home state of California, where regular gas now routinely tops $4.50 a gallon.

As the economic environment gets tougher, many restaurant operators are seeking new ways to increase sales, said Karen Eadon, chief marketing officer for Costa Mesa, Calif.-based El Pollo Loco.

“Consumers are looking for more convenience,” she said, “and they’re used to the idea of delivery for convenience.”

About half of El Pollo Loco’s more than 400 restaurants do delivery, though typically only for catered orders of $50 or more. When the chain opened a small branch in a densely populated area of West Los Angeles late last year, company officials decided to test delivery for orders totaling as little as $15, not counting a $2.50 delivery charge.

To offset gas costs, El Pollo Loco picked the new ZAP car as its delivery vehicle and covered the three-wheel subcompact from bumper to bumper in the chain’s eye-catching logo design. The cars, which cost about $12,000 each, travel no faster than 40 miles per hour. They’re recharged fully in about six hours by plugging them into a 110-volt outlet, and they can travel about 20 miles on a charge.

Officials of Santa Rosa, Calif.-based ZAP said the cost of running one of its cars is about 3 cents per mile, compared with about 13.3 cents per mile for a gas vehicle that gets 30 miles per gallon.

Though marketing chief Eadon said El Pollo Loco hasn’t been conducting its delivery test long enough yet to fully gauge customer response, she said the biggest challenge so far has been finding delivery personnel who have safe-driving records.

For brands like Pizza Fusion, the use of environmentally friendly cars to deliver pizzas is in keeping with the company’s goal of “saving the earth, one pizza at a time,” officials said.

Franchisees are required to purchase two to three hybrid cars, or vehicles with equal or better fuel efficiency, explained Eric Haley, the franchisor’s vice president of communications. Delivery fees charged by the chain’s five units vary by location.

Jeffrey Melnick, who is scheduled to open a Pizza Fusion location in Atlanta in September, plans to use gas-powered scooters and Smart cars, the latter of which get about 40 miles per gallon. He plans to charge a $2 fee for delivery, and he expects delivery will account for about half of sales.

Drivers of the fuel-efficient scooters—they’ll have specially designed warming boxes to fit the brand’s oblong pizzas—don’t need vehicle tags or a driver’s license, and parking is less of an issue, Melnick said.

Organic To Go, whose more than 170 locations include 33 fast-casual cafes, derives about 40 percent of its sales from delivery orders. The company owns a fleet of Toyota Prius hybrids, but also recently purchased larger Sprinter diesel trucks, even though the cost of diesel fuel is generally higher. The trucks allow for more efficient consolidation of deliveries, explained Jason Brown, Organic To Go’s chairman and chief executive.

The chain has begun sending two people on delivery runs to deliver more food per trip. One staffer might use a cart that fits in the truck to walk part of the delivery route.

Because Organic To Go uses a commissary system, “we’re trying to grow in specific geographic regions to have density for delivery,” Brown said.

Delivery fees vary by region, though Brown said the company is considering a fee hike in the fall. Currently, customers in the Seattle area pay about $5.95 for delivery, and the charge ranges from $9.95 to $15 in other areas. The average order is more than $200, Brown confirmed.

The Cheesecake Factory has been testing delivery for about three months using various third-party delivery specialists in six markets across the country, including Los Angeles and neighboring Orange County.

“It’s really about the convenience factor; we recognize how time-crunched everyone is,” said Alethea Rowe, director of restaurant marketing for the Calabasas Hills, Calif.-based chain. “It’s done very well for us so far.”

In Los Angeles, Cheesecake Factory has partnered with LA Bite, a delivery and marketing service whose clientele includes some 500 restaurants across the city. Cheesecake Factory’s delivery fee is $6.99 at lunch and $5.99 at dinner with no minimum order, and LA Bite earns a commission on food sales.

Like many pizza chains, LA Bite uses independent contractors as drivers, and they supply their own cars and pay for gas. In the past, LA Bite took a share of delivery fees, but drivers recently negotiated a change in policy to keep all of the delivery fee as well as tips to cover their higher fuel costs.

“Rather than raise delivery charges for customers, we’ve absorbed it,” said Ken Fischer, president of LA Bite.

The company also has tightened its geographic focus on specific neighborhoods, cutting down on the distance delivery drivers must travel.

For LA Bite, the upside of higher gas prices has been that more restaurant companies are adopting its services, including such major brands as Chili’s [7] and BJ’s, Fischer said.

“I have heard firsthand from several restaurants that their takeout sales are down significantly from last year,” he said. “I’m sure gas prices have something to do with that.”

For smaller operators like Gregg Majewski, whose two Patty Burger restaurants in Chicago and Milwaukee get about 50 percent of their sales from delivery and charge a flat 50-cent fee for each order, drivers are employees who use their own cars. They had earned about 5 percent of delivery sales, but with gas prices averaging about $4.15 in Milwaukee, Majewski in May began paying drivers an extra 50 cents per trip and will keep doing that unless gas falls back below $3.50 per gallon.

The good news, however, is that delivery orders are on the rise, jumping just since March by 20 percent to 30 percent, he said.

“People are looking for cheaper alternatives to meals, and they want to drive less,” he said. “Why order pizza when you can get a fresh, juicy burger delivered?”